Lease options are not my favorite way to buy
A lot of my students want to learn about lease options.
I have done a lot of them and have made a lot of money. However, they are not my first choice I always say the risk is commensurate with the reward and there are greater risks with a lease with an option than getting the deed. People talk about using lease options as control without ownership but that can be a misnomer.
Having a deed to a property when you didn’t qualify and have no money at risk- that’s control. That’s why I always ask for the deed first. If they are desperate and have no other choice than they will do it. If they are not behind on payments but just hate the situation or they are upside down, then a long term lease option is the best choice. It’s a win win for everyone. Don’t forget to record your option so they can’t refinance or sell it to someone else. When you are buying on a lease option, you combine the lease and option into one contract so a problem with the lease does not violate the option.
However when you are selling on a lease with an option, my favorite way to use lease options, the lease and the option are separate. That way if your tenant violates the lease, his option voids.
In Ca, it’s tough to make money on a lease with option. Rents are so high here that making a spread is real problem. I would rather do an installment land contract rather than a lease with an option. That’s another reason to have the deed- you have the choice. If all you have from the seller is a lease with an option, you can only sandwich lease option or rent. What I did in the go go years was lease with options knowing that I was not making money but rode the wave up. I made my money when I sold- and boy did I make money. This is a good time to do that but be prepared to wait for many years. DO NOT BUY A PROPERTY AND FIGURE ON HOLDING IT FOR A FEW YEARS AND MAKING MONEY. In these times, either you get a discount or you get a monthly spread.
